The military government can look to 2017 for the economy’s best performance in five years, but the strength of the recovery is expected to wane.
Gross domestic product probably increased 3.8% last year, the fastest pace since 2012, before easing to 3.7% this year and to 3.6% in 2019, according to a Bloomberg survey. Once prized in Southeast Asia for its economic strength, Thailand’s growth is lagging peers with economies in Vietnam and Philippines expanding more than 6%.
“2017 and 2018 will certainly be better compared to the last few years but the underperformance of the industrial sector, particularly manufacturing, will likely continue,” said Rahul Bajoria, a senior economist at Barclays Plc in Singapore. “What’s really missing here is the lack of private investment before we see growth closer to 5%.”
Thailand’s expansion has slowed this decade, averaging 3% through 2016 compared with 4.6% in the 10 years through 2010. Prime Minister Prayut Chan-o-cha is increasing spending to a record in fiscal year 2018 (which started in October) while pushing ahead on a 1.5 trillion baht infrastructure plan including a high-speed rail venture with China and mass transit lines in Bangkok to boost growth.
Rising exports and tourism are also giving the economy a boost and the state planning agency forecast growth of as much as 4.6% this year.
“The Thai economy will be smooth, like a Teflon-coated pan, as we expect investment to pick up, leading to a more broad-based recovery,” said Amonthep Chawla, head of research at CIMB Bank Thai Pcl. “The election will be the key local risk for next year. But it doesn’t have much impact on the economy compared to risks from global factors. Our economy has proven its resiliency. Even if the election is delayed, the economy can still grow.”
But even with all that optimism, private investment remains low. Wages are weak and debt burdens for households and companies are elevated, adding to risks that the recovery may falter.
The military, which has held power since a coup in 2014, said it’s on course for an election in November, although doubts remain. The Bank of Thailand has held its benchmark rate near a record-low 1.5% since 2015 and most economists predict no change through 2018, though some forecast an increase.Thailand’s exports are coping with the strength of the baht, which advanced more than 9% last year, among the best performers in Asia. The central bank in December raised its forecasts for export growth to 9.3% for 2017 and to 4% for 2018.